SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/X/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12
AUTOMATIC DATA PROCESSING, INC.
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(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
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[LOGO]
AUTOMATIC DATA PROCESSING, INC.
ONE ADP BOULEVARD - ROSELAND, NEW JERSEY 07068
---------------------
NOTICE OF 1998 ANNUAL MEETING OF STOCKHOLDERS
------------------------
To the Stockholders:
PLEASE TAKE NOTICE that the 1998 Annual Meeting of Stockholders of AUTOMATIC
DATA PROCESSING, INC. (the "Company") will be held at 10:00 a.m., Tuesday,
November 10, 1998 at the Company's corporate headquarters, ONE ADP BOULEVARD,
ROSELAND, NEW JERSEY 07068, for the following purposes:
1. To elect a Board of Directors (Proposal 1);
2. To approve an amendment to the Restated Certificate of Incorporation of
the Company to increase the number of authorized shares of Common Stock
of the Company to 1,000,000,000 shares (Proposal 2);
3. To approve an amendment to the Company's Employees' Savings--Stock
Purchase Plan approved by the Board of Directors increasing by 5,000,000
shares the number of shares of Common Stock of the Company that may be
acquired by employees under such plan (Proposal 3);
4. To ratify the appointment of Deloitte & Touche LLP to serve as the
Company's independent certified public accountants for the fiscal year
which began on July 1, 1998 (Proposal 4); and
5. To transact such other business as may properly come before the meeting
or any adjournment or adjournments thereof.
Only the holders of Common Stock of record at the close of business on
September 11, 1998 are entitled to vote at the meeting. Each stockholder is
entitled to one vote for each share of Common Stock held on the record date.
By order of the Board of Directors
JAMES B. BENSON
SECRETARY
September 22, 1998
Roseland, New Jersey
THE PRESENCE IN PERSON AND/OR THE REPRESENTATION BY PROXY OF THE HOLDERS OF
A MAJORITY OF THE ISSUED AND OUTSTANDING SHARES OF STOCK ENTITLED TO VOTE IS
NECESSARY AND SUFFICIENT TO CONSTITUTE A QUORUM. ACCORDINGLY, IF YOU DO NOT
EXPECT TO BE PRESENT AT THE MEETING, PLEASE EXECUTE THE ACCOMPANYING PROXY AND
RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED
IN THE UNITED STATES, SO THAT YOUR SHARES OF STOCK MAY BE REPRESENTED AT THE
MEETING.
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS OF
[LOGO]
AUTOMATIC DATA PROCESSING, INC.
ONE ADP BOULEVARD - ROSELAND, NEW JERSEY 07068
TO BE HELD ON NOVEMBER 10, 1998
SOLICITATION AND REVOCATION OF PROXY
The accompanying proxy is being solicited by the Board of Directors of the
Company for use at the forthcoming Annual Meeting of Stockholders. Each
stockholder giving such a proxy has the power to revoke the same at any time
before it is voted by so notifying the Secretary of the Company in writing. All
expenses in connection with the solicitation will be borne by the Company. This
proxy statement and the accompanying proxy are being mailed to the stockholders
on or about September 22, 1998.
The Company has one class of securities outstanding and entitled to vote at
the Annual Meeting of Stockholders, its Common Stock, par value $.10 per share.
At the close of business on September 11, 1998, the record date for
determination of stockholders entitled to notice of and to vote at the meeting,
the Company had issued and outstanding [ ] shares of Common Stock
(excluding [ ] treasury shares not entitled to vote). Each outstanding
share of Common Stock is entitled to one vote with respect to each matter to be
voted on at the meeting.
The representation in person or by proxy of a majority of the shares
entitled to vote shall constitute a quorum at the Annual Meeting of
Stockholders. Directors are elected by a plurality of the affirmative votes
cast. The affirmative vote of the holders of a majority of the outstanding
shares entitled to vote thereon is required to approve the amendment of the
Company's Restated Certificate of Incorporation increasing to 1,000,000,000
shares the number of authorized shares of Common Stock of the Company. The
affirmative vote of the holders of a majority of the outstanding shares present
in person or by proxy and entitled to vote thereon is required (i) to approve
the amendment of the Company's Employees' Savings--Stock Purchase Plan
increasing by 5,000,000 shares the number of shares of Common Stock of the
Company that may be acquired by employees under such plan and (ii) to ratify the
appointment of Deloitte & Touche LLP as the Company's independent certified
public accountants. Under the Company's Restated Certificate of Incorporation
and By-laws and under Delaware law, abstentions and "non-votes" are counted as
present in determining whether the quorum requirement is satisfied. With regard
to the election of Directors, votes may be cast in favor or withheld. Votes that
are withheld will be excluded entirely from the vote and will have no effect.
Abstentions may be specified on any proposal (other than the election of
Directors) and will have the effect of a negative vote. Under applicable
Delaware law, a non-vote will have no effect on the outcome of the election of
Directors, the amendment of the Employees' Savings--Stock Purchase Plan or the
ratification of the appointment of Deloitte & Touche LLP, but will have the
effect of a negative vote on the amendment of the Company's Restated Certificate
of Incorporation. A non-vote occurs when a nominee holding shares for a
beneficial owner votes on one proposal, but does not vote on another proposal
because the nominee does not have discretionary voting power and has not
received instructions from the beneficial owner.
The Company's Board of Directors has adopted a policy whereby stockholders'
proxies are received by the Company's independent tabulators and the vote is
certified by independent inspectors of election. Proxies and ballots that
identify the vote of individual stockholders will be kept confidential from the
Company's management and directors, except as necessary to meet legal
requirements, in cases where stockholders request disclosure, or in a contested
election.
PROPOSAL 1
ELECTION OF DIRECTORS
Properly executed proxies will be voted as marked, and if not marked, will
be voted in favor of the election of the persons named below (each of whom is
now a director) as directors to serve until the next Annual Meeting of
Stockholders and until their successors are duly elected and qualified. If any
nominee does not remain a candidate at the time of the meeting (a situation
which management does not anticipate), proxies solicited hereunder will be voted
in favor of those nominees who do remain as candidates and may be voted for
substitute nominees designated by the Board of Directors.
SERVED AS A
DIRECTOR
CONTINUOUSLY
NAME AGE SINCE PRINCIPAL OCCUPATION
- ------------------------------ --- --------------- -------------------------------------------------------------
Gary C. Butler................ 51 1996 President and Chief Operating Officer of the Company (1)
Joseph A. Califano, Jr........ 67 1982 Chairman of the Board and President, The National Center on
Addiction and Substance Abuse at Columbia University (2)
Leon G. Cooperman............. 55 1991 Chairman and Chief Executive Officer, Omega Advisors, Inc.,
an investment partnership (3)
George H. Heilmeier........... 62 1994 Chairman Emeritus of Bellcore, a research and engineering
consortium (4)
Ann Dibble Jordan............. 63 1993 Consultant (5)
Harvey M. Krueger............. 69 1967 Vice Chairman of Lehman Brothers, investment bankers (6)
Frederic V. Malek............. 61 1978 Chairman, Thayer Capital Partners, a merchant banking firm
(7)
Henry Taub.................... 71 1961 Honorary Chairman of the Board of the Company, Chairman of
the Executive Committee of the Board of the Company (8)
Laurence A. Tisch............. 75 1972 Co-Chairman and Co-Chief Executive Officer of Loews
Corporation, which is engaged in the consumer products,
hotel and insurance businesses (9)
Arthur F. Weinbach............ 55 1989 Chairman of the Board and Chief Executive Officer of the
Company (10)
Josh S. Weston................ 69 1977 Honorary Chairman of the Board of the Company (11)
- ------------------------
(1) Mr. Butler has held the indicated position since April 1998. Prior thereto,
he had been Group President of the Employer Services Group since January
1995. Prior to that he had been Group President for the Dealer Services
Group of the Company for more than five years.
2
(2) Mr. Califano has been Chairman of the Board and President of The National
Center on Addiction and Substance Abuse at Columbia University since 1992.
Mr. Califano was a senior partner in the Washington, D.C. office of Dewey
Ballantine from 1983 through 1992. He is also a director of Authentic
Fitness Corporation, Chrysler Corporation, HealthPlan Services, Inc., K Mart
Corporation and Warnaco Inc.
(3) Mr. Cooperman has held the indicated position since 1991. Mr. Cooperman was
Chairman and Chief Executive Officer of Goldman Sachs Asset Management from
1989 until July 1991, and is a limited partner of Goldman, Sachs & Co. Prior
to that time, Mr. Cooperman spent 22 years in Goldman Sachs' Investment
Research Department, in which he served as partner-in-charge, co-chairman of
the Investment Policy Committee and chairman of the Stock Selection
Committee.
(4) Dr. Heilmeier has been Chairman Emeritus of Bellcore (Bell Communication
Research) since November 1997. Dr. Heilmeir served as Chairman and Chief
Executive Officer of Bellcore from March 1991 to November 1997. Dr.
Heilmeier is also a director of Compaq Computer Corporation, The MITRE
Corporation, Perot Systems Corp. and TRW, Inc.
(5) Ms. Jordan is the former Director, Social Services Department, Chicago
Lying-In Hospital, University of Chicago Medical Center, a position she
assumed in 1970. She is also a director of Johnson & Johnson Corporation,
Salant Corporation, The Coleman Company and Travelers Group Inc.
(6) Mr. Krueger is Vice Chairman of Lehman Brothers and has been a senior
officer of Lehman Brothers and its predecessor companies for more than the
past five years. He is also a director of Chaus, Inc., Club Med Inc., IVAX
Corporation and R.G. Barry Corporation.
(7) Mr. Malek has been Chairman of Thayer Capital Partners since 1992. Mr. Malek
is also a director of Aegis Communications Group, Inc., American Management
Systems Corp., CB Commercial Estate Group, Choice Inc., FPL Group
Incorporated, Northwest Airlines, Inc. and various Paine Webber mutual
funds.
(8) Mr. Taub became Honorary Chairman of the Company's Board of Directors in
1986 and has been Chairman of the Executive Committee since 1983.
(9) Mr. Tisch has been Co-Chairman and Co-Chief Executive Officer of Loews
Corporation for more than the past five years. He is also a director of
Bulova Corporation, CNA Financial Corporation, Federated Department Stores,
Inc., Loews Corporation and Petrie Stores Corp.
(10) Mr. Weinbach became Chairman of the Board and Chief Executive Officer of
the Company in April 1998, having served as President and Chief Executive
Officer since 1996 and President and Chief Operating Officer since January
1994. Prior to that time, he served as Executive Vice President since August
1992. He is also a director of HealthPlan Services, Inc.
(11) Mr. Weston became Honorary Chairman of the Company's Board of Directors in
April 1998. He served as Chairman of the Board of the Company from August
1996 to April 1998. Prior to August 1996, he served as Chairman of the Board
and Chief Executive Officer of the Company for more than the past five
years. He is also a director of GIGA Corp., J. Crew Group Inc., Olsten
Corp., Public Service Enterprise Group, Shared Medical Systems Corporation
and Vanstar Corporation.
DIRECTORS' MEETINGS, COMMITTEES AND FEES
During the last fiscal year five meetings of the Board of Directors were
held. All directors attended at least 75%, in the aggregate, of the meetings of
the Board of Directors and the committees of which they were members.
3
The Company has a standing Audit Committee composed of Messrs. Califano,
Cooperman and Krueger, and Ms. Jordan. Mr. Krueger is the Chairman. The
principal functions of the Audit Committee are to (i) make recommendations to
the full Board of Directors concerning the appointment of independent auditors,
(ii) review the scope of the audit and related fees, (iii) review the Company's
accounting principles, policies and reporting practices with the independent and
internal auditors and management, (iv) discuss with the independent auditors the
results of their audit and determine what action, if any, is required with
respect to the Company's internal controls and (v) consider other audit and
non-audit matters from time to time as requested by the full Board of Directors.
The Audit Committee met four times during fiscal 1998.
The Company has a Compensation Committee composed of Messrs. Heilmeier,
Malek and Tisch. Mr. Malek is the Chairman. The purpose of the Compensation
Committee is to develop guidelines and review the compensation and performance
of officers of the Company and other Company associates, to review and approve
criteria for granting bonuses and options to officers of the Company, and to
develop plans for managerial succession. The Compensation Committee met three
times during fiscal 1998.
The Company has an Executive Committee composed of Messrs. Krueger, Malek,
Taub, Weinbach and Weston. Mr. Taub is the Chairman. The purpose of the
Executive Committee is to act in the absence of the Board of Directors. The
Executive Committee met three times during fiscal 1998.
The Company does not have a Nominating Committee or any committee performing
nominating or similar functions.
Non-employee directors are paid an annual retainer of $30,000, plus $1,000
for each Board of Directors meeting attended. In addition, non-employee
directors are paid $750 for each committee meeting attended, except for the
chairman of such committee, who is paid $1,000 for each meeting he attends, and
except that each non-employee member of the Executive Committee is paid $1,000
for each meeting he attends. Non-employee directors may elect to defer payment
of the above amounts. There are no fees paid to employee directors or other fee
arrangements provided by the Company.
The non-employee directors of the Company are entitled to participate in the
1989 Non-Employee Director Stock Option Plan (the "Directors' Plan") pursuant to
which options for 7,500 shares of Common Stock will automatically be granted to
persons who become non-employee directors. In addition, each non-employee
director will be granted an additional option for 7,500 shares on the first
business day after each fifth anniversary of the date of the initial grant to
each such non-employee director, provided that he or she is then still serving
in such capacity. The Directors' Plan was adopted on November 2, 1989 and will
remain in effect until terminated by action of the Board of Directors. All
options have been and will be granted at the fair market value of the Common
Stock, determined on the basis of the closing price of the Common Stock in
consolidated trading on the date of grant, as reported in The Wall Street
Journal. Twenty percent of the options granted under the Directors' Plan become
exercisable on the first anniversary of the date such options are granted, and
twenty percent become exercisable on each successive anniversary date until all
such options are exercisable, provided that options become exercisable only if
the director is then still serving in such capacity, unless certain specified
events occur such as the death, disability or retirement of a director, in which
case the options shall immediately vest and become fully exercisable. All
options granted under the Directors' Plan have a term of ten years. Under the
Directors' Plan, options for 20,000 shares at an exercise price of $11.46 per
share and options for 10,000 shares at an exercise price of $28.72 per share
have been
4
granted to each of Messrs. Califano, Krueger, Malek and Tisch; Mr. Cooperman has
been granted an option for 20,000 shares at an exercise price of $19.34 per
share and an option for 5,000 shares at an exercise price of $41.50 per share;
Ms. Jordan has been granted an option for 10,000 shares at an exercise price of
$26.15 per share and and option for 7,500 shares at an exercise price of $60.28
per share; and Dr. Heilmeier has been granted an option for 10,000 shares at an
exercise price of $29.38 per share. Depending upon the date of grant, the
foregoing option grants reflect adjustments resulting from subsequent two 2 for
1 stock splits.
Any person who first becomes a non-employee director after August 13, 1997
is not eligible to receive a pension from the Company. A non-employee director
(who was a director on August 13, 1997) who chooses to retire after 20 years of
service in such capacity and having attained the age of 70 will receive a
pension of $25,000 per year for the remainder of his or her life. If such
non-employee director chooses to retire after having attained the age of 65 with
15 years of service, he or she will receive a pension of $12,500 per year.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGERS
The following table contains information as of August 28, 1998 with respect
to the beneficial ownership of Common Stock of the Company by each director and
nominee for director of the Company, by each of the executive officers of the
Company named in the Summary Compensation Table and by all directors and
executive officers of the Company as a group (including the named individuals).
Unless otherwise noted in the footnotes following the table, the persons as to
whom the information is given had sole voting and investment power over the
shares of Common Stock shown as beneficially owned. To the knowledge of the
management of the Company, no person beneficially owned as of August 28, 1998
more than 5% of the outstanding shares of the Company's Common Stock.
SHARES OF COMMON STOCK
NAME BENEFICIALLY OWNED (1) PERCENT
- ------------------------------------------------------------ ----------------------- -----------
Gary C. Butler (2).......................................... 310,550 *
Joseph A. Califano, Jr...................................... 26,800 *
Leon G. Cooperman........................................... 22,000 *
Richard J. Daly............................................. 133,612 *
Russell P. Fradin........................................... 61,260 *
George H. Heilmeier......................................... 6,200 *
John P. Hogan............................................... 125,899 *
Ann Dibble Jordan........................................... 10,200 *
Harvey M. Krueger........................................... 42,000 *
Frederic V. Malek (3)....................................... 12,500 *
Henry Taub (4).............................................. 4,094,776 1.4%
Laurence A. Tisch........................................... 3,200 *
Arthur F. Weinbach.......................................... 519,910 *
Josh S. Weston.............................................. 622,978 *
Directors and Executive Officers as a group
(21 persons, including those named above) (5)............. 6,348,947 2.1%
5
- ------------------------
* Indicates less than one percent.
(1) Includes shares that may be acquired upon the exercise of options granted by
the Company that are exercisable prior to October 27, 1998. The shares
beneficially owned include 110,000, 26,000, 20,000, 91,000, 6,000, 104,000,
26,000, 332,000, 370,000 and 10,000 shares subject to such options granted
to Messrs. Butler, Califano, Cooperman, Daly, Heilmeier, Hogan, Krueger,
Weinbach and Weston and Ms. Jordan, respectively, and 1,095,000 shares
subject to such options granted to the Directors and Executive Officers as a
group.
(2) In addition, members of Mr. Butler's immediate family were potential
beneficiaries of a charitable trust owning 600 shares of Common Stock of the
Company.
(3) In addition, members of Mr. Malek's immediate family were potential
beneficiaries of charitable trusts or owned outright an aggregate of 1,600
shares of Common Stock of the Company.
(4) Members of Mr. Taub's immediate family were potential beneficiaries of
charitable trusts or owned outright an aggregate of 149,679 shares of Common
Stock of the Company.
(5) Members of the immediate families of non-director officers of the Company
owned 1,316 shares of Common Stock of the Company.
STOCKHOLDER APPROVAL REQUIRED
Directors shall be elected by a plurality of the affirmative votes cast at
the meeting.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
ELECTION OF THE NOMINEES TO THE BOARD OF DIRECTORS.
6
COMPENSATION OF EXECUTIVE OFFICERS
The following sections of this proxy statement cover the components of the
total compensation of the Company's chief executive officer and the four other
most highly compensated executive officers of the Company. These sections
include: (i) a series of tables covering annual and long-term compensation; (ii)
a pension plan table summarizing the annual benefits payable under the Company's
defined benefit retirement plans; (iii) a report by the Compensation Committee
of the Board of Directors describing the Company's compensation policies for
fiscal 1998 for its executive officers and the rationale upon which its chief
executive officer's compensation for fiscal 1998 was based; and (iv) a
performance graph comparing the Company's total stockholder return to the S&P
500 and a Peer Group Index over a five year period.
SUMMARY COMPENSATION TABLE
The following table summarizes the compensation of the Company's chief
executive officer and the four other most highly compensated executive officers
for services in all capacities to the Company for the three years ended June 30,
1998.
ANNUAL
COMPENSATION(1) LONG-TERM COMPENSATION
-------------------- -----------------------
NUMBER OF
SECURITIES
RESTRICTED UNDERLYING
YEAR STOCK OPTIONS
NAME AND ENDED AWARDS GRANTED COMPENSATION
PRINCIPAL POSITION JUNE 30, SALARY BONUS (2) (3) (4)
- --------------------- ----------- --------- --------- ---------- ----------- -------------
Arthur F. Weinbach 1998 $ 625,000 $ 412,500 $1,778,150 100,000 $ 6,244
Chairman and Chief 1997 $ 571,667 $ 315,000 $ -- 110,000 $ 5,329
Executive Officer 1996 $ 475,000 $ 235,000 $ -- -- $ 5,861
Gary C. Butler 1998 $ 506,151 $ 325,000 $1,595,963 60,000 $ 5,680
President and Chief 1997 $ 457,500 $ 240,000 $ -- 50,000 $ 5,463
Operating Officer 1996 $ 415,000 $ 228,000 $ 470,375 20,000 $ 6,086
Russell P. Fradin 1998 $ 420,595 $ 225,000 $ -- 50,000 $ 4,377
Group President 1997 $ 279,710 $ 200,000 $2,538,750 120,000 $ --
Richard J. Daly 1998 $ 318,269 $ 195,000 $ -- 41,400 $ 5,499
Group President 1997 $ 275,877 $ 180,000 $ 488,800 45,000 $ 4,409
1996 $ 208,214 $ 176,200 $ 478,950 45,000 $ 4,160
John P. Hogan 1998 $ 318,270 $ 190,000 $ -- 25,000 $ 4,486
Group President 1997 $ 265,000 $ 175,000 $ -- -- $ 3,115
1996 $ 215,306 $ 176,400 $ 965,625 100,000 $ 4,610
- ------------------------
(1) None of the named executive officers received any perquisites or other
personal benefits of an amount, or any other annual compensation of a type
required to be reported by the Securities and Exchange Commission pursuant
to applicable rules and regulations.
(2) The dollar values shown in the Restricted Stock Awards column are based on
the closing market price of the Company's Common Stock on the date the
restricted shares were granted. Restricted shares may not be transferred or
pledged, but such Company-imposed restrictions lapse with the
7
passage of time (generally over periods of up to five years) and continued
employment with the Company.
As of June 30, 1998, the aggregate number of shares of restricted stock held
by each named executive officer and the aggregate fair market value of such
shares (calculated by multiplying the aggregate number of shares held by
each such named executive officer by $72.875, the closing price on the New
York Stock Exchange of the Company's Common Stock on June 30, 1998) was: Mr.
Weinbach, 24,400 shares ($1,778,150); Mr. Butler, 21,900 shares
($1,595,963); Mr. Fradin, 50,000 shares ($3,643,750), Mr. Daly, 22,800
($1,661,550) and Mr. Hogan, 25,000 ($1,821,875).
The restricted stock awards to the named executive officers reported in the
table that vest, in whole or in part, in under three years from the date of
grant, together with their vesting schedule, are as follows:
(i) Mr. Weinbach received a grant of 24,400 restricted shares in fiscal
1998, 12,200 of which will vest in each of fiscal 2000 and 2001.
(ii) Mr. Butler received a grant of 21,900 restricted shares in fiscal 1998,
1,300 of which will vest in fiscal 2000, and 10,300 of which will vest in
each of fiscal 2001 and 2002. In addition, Mr. Butler received a grant of
14,200 restricted shares in fiscal 1996, 1,300 of which vested in each of
fiscal 1996, 1997 and 1998, 1,300 will vest in fiscal 1999 and 9,000 will
vest in fiscal 2000.
(iii) Mr. Fradin received a grant of 50,000 restricted shares in fiscal 1998
of which 10,000 vested in fiscal 1998, and 10,000 will vest in each of
fiscal 1999 through 2002.
(iv) Mr. Daly received a grant of 10,400 restricted shares in fiscal 1997,
of which 2,600 vested in 1997, 2,400 vested in fiscal 1998, 2,200 will
vest in fiscal 1999, 1,800 will vest in fiscal 2000, and 1,400 will vest
in fiscal 2001. Mr. Daly also received a grant of 12,400 restricted
shares in fiscal 1996, of which 1,000 vested in fiscal 1996, 1,200 vested
in fiscal 1997, 1,400 vested in fiscal 1998, and 1,600 will vest in
fiscal 1999, and 3,600 will vest in each of fiscal 2000 and 2001.
(iii) Mr. Hogan received a grant of 25,000 restricted shares in fiscal 1996,
of which 5,000 vested in each of fiscal 1997 and 1998, 5,000 will vest in
each of fiscal 1999 through 2001.
Dividends are paid on restricted stock at the same rate as other
outstanding shares of the Company's Common Stock. In the event of a
change of control of the Company, the unvested portion of the restricted
stock of Messrs. Weinbach and Butler will be subject to limited
accelerated vesting.
(3) The Company does not award Stock Appreciation Rights (SARS).
(4) For the year ended June 30, 1998, consists of the sum of: (i) contributions
to the Company's Retirement and Savings Plan (401(k)) in the following
amounts, Mr. Weinbach, $5,223, Mr. Butler, $5,225, Mr. Fradin, $4,275, Mr.
Daly, $5,213, and Mr. Hogan, $4,269; and (ii) compensatory split-dollar
insurance premiums (with a statistically calculated economic benefit to the
executive determined by Phoenix Home Life Insurance Company for W-2 income
purposes) in the following amounts: Mr. Weinbach, $1,021, Mr. Butler, $455,
Mr. Fradin, $102, Mr. Daly, $286, and Mr. Hogan, $217.
8
STOCK OPTION PLANS
The Company has in effect a 1981 Key Employees' Stock Option Plan (the "1981
Plan") and a 1990 Key Employees' Stock Option Plan (the "1990 Plan"). The 1981
Plan and the 1990 Plan collectively are referred to as the "Option Plans".
Officers and key employees are eligible to participate in the Option Plans,
which permit the issuance, in addition to non-qualified options, of "incentive
stock options" ("ISOs") within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"). The Company has ceased granting
options under the 1981 Plan, but outstanding options under the 1981 Plan remain
valid. In the event of a change in control of the Company, the unvested portion
of the stock options of Messrs. Weinbach and Butler will be subject to limited
accelerated vesting.
The Option Plans are administered by the Compensation Committee of the Board
of Directors. The Committee has the authority to determine the employees to whom
options will be granted and, subject to the Option Plans, the terms and amount
of options granted.
ISOs expire no more than ten years from their date of grant, with an
exercise price equal to 100% of the fair market value on the date of grant.
Non-qualified options, as granted, expire 10 years after the date of grant with
an exercise price equal to 100% of the fair market value on the grant date.
An optionee has no rights as a stockholder with respect to any shares
covered by his options until the date of issuance of a stock certificate to him
for such shares. During the life of the optionee, the option is exercisable only
by him. No option is exercisable more than 15 days after termination of
employment, or (if termination is due to the death of an optionee) more than six
months after the appointment and qualification of an executor or administrator
of the deceased optionee's estate or 12 months after the death of the optionee,
whichever occurs earlier.
The following table sets forth certain information concerning stock option
grants to the named executive officers during the fiscal year ended June 30,
1998.
OPTION GRANTS IN LAST FISCAL YEAR
----------------------------------------------------------------------
NUMBER OF PERCENT OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED
OPTIONS TO EMPLOYEES EXERCISE GRANT DATE
GRANTED IN FISCAL YEAR PRICE EXPIRATION VALUE
NAME (#) (1) (%) ($/SHARE) DATE ($) (2)
- ----------------------------- ----------- ------------------- ----------- ----------- ----------
Arthur F. Weinbach 100,000 1.8 46.56 8/13/07 $1,177,143
Gary C. Butler 60,000 1.1 64.06 5/18/08 $ 979,586
Russell P. Fradin 50,000 0.9 64.06 5/18/08 $ 829,522
Richard J. Daly 41,400 0.8 54.62 11/11/07 $ 575,305
John P. Hogan 25,000 0.5 54.62 11/11/07 $ 334,264
- ------------------------
(1) All options were granted pursuant to the 1990 Plan. The options were granted
at an exercise price equal to the fair market value of the Company's Common
Stock on the date of grant. The options were granted for terms of ten years,
and vest fully during periods from four to six years subsequent to the date
of grant.
(2) The grant date values were calculated on the basis of the Black-Scholes
option pricing model. Options were assumed to be exercised 6.2 years after
the date of grant, based on historical
9
experience. A risk-free interest rate of 6.27%, stock price volatility of
13.91% and the dividend yield of 1% were used in the calculation for the
option grants to Mr. Weinbach. A risk-free interest rate of 5.67%, stock
price volatility of 17.35% and the dividend yield of 1% were used in the
calculation for the option grant to Messrs. Butler and Fradin. A risk-free
interest rate of 5.91%, stock price volatility of 15.56% and the dividend
yield of 1% were used in the calculation for the option grant to Messrs.
Daly and Hogan. A discount of 3% was applied to the calculated value to
reflect the risk of forfeiture during the option term. The actual value of
the options will depend on the market value of the Company's Common Stock on
the dates the options are exercised. No realization of value from the
options is possible without an increase in the price of the Company's Common
Stock, which would benefit all stockholders commensurately.
10
AGGREGATED OPTION EXERCISES
FOR FISCAL YEAR ENDED JUNE 30, 1998
AND OPTION VALUES AS OF JUNE 30, 1998
The following table sets forth certain information concerning option
exercises during the last fiscal year by the named executive officers and
unexercised options held by such officers at the end of the last fiscal year.
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
OPTIONS AT 6/30/98 6/30/98
(#) ($)
------------------------- -------------------------
SHARES
ACQUIRED VALUE
ON EXERCISE REALIZED
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -------------- -------------- ------------- ---------- ------------- ----------- ------------
Arthur F.
Weinbach 40,000 $ 2,250,000 328,000 302,000 $18,596,000 $10,196,000
Gary C. Butler 70,000 250,000 $ 4,098,000 $8,067,000
Russell P.
Fradin 20,000 150,000 $ 611,000 $3,495,000
Richard J.
Daly 81,000 130,400 $ 3,876,000 $4,007,000
John P. Hogan 99,000 108,000 $ 4,246,000 $3,563,000
DEFINED BENEFIT PLANS
The following table shows the estimated annual retirement benefits payable
under the Company's retirement program, consisting of the Retirement Capital
Accumulation Plan (the "Pension Plan") and the Supplemental Officers' Retirement
Plan (the "Supplemental Retirement Plan"), to persons in specified average
compensation and credited service classifications, assuming retirement at age
65.
FINAL YEARS OF CREDITED SERVICE AT RETIREMENT
5-YEAR AVERAGE ---------------------------------------------------------------------------------------------
COMPENSATION 10 15 20 25 30
- ----------------- ----------------- ----------------- ----------------- ----------------- -----------------
$ 400,000 $ 65,000 $ 101,000 $ 119,000 $ 130,000 $ 147,000
500,000 80,000 124,000 144,000 155,000 172,000
600,000 95,000 146,000 169,000 180,000 197,000
700,000 110,000 169,000 194,000 205,000 222,000
800,000 125,000 191,000 219,000 230,000 247,000
900,000 140,000 214,000 244,000 255,000 272,000
1,000,000 155,000 236,000 269,000 280,000 297,000
Compensation covered by the Pension Plan is limited to January 1 base salary
up to the current compensation limit in effect for the plan year. Compensation
covered under the Supplemental Retirement Plan includes cash compensation and
compensation from restricted stock vesting during the year. Benefits under the
Supplemental Retirement Plan are subject to reduction for social security,
Pension Plan and 401(k) benefits.
11
Messrs. Butler, Fradin, Daly and Hogan have, in the aggregate, 22, 0, 4 and
8 years of credited service respectively under the Pension Plan and 9, 1, 3 and
4 years of service respectively under the Supplemental Retirement Plan. Mr.
Weinbach has 17 years of credited service under the Pension Plan. The Company
has agreed that for purposes of the Supplemental Retirement Plan, Mr. Weinbach
is deemed to have 10 years of credited service and, unless his employment is
terminated for cause, will receive the maximum benefits available under such
Plan.
EMPLOYMENT AGREEMENT
Arthur F. Weinbach entered into an employment agreement with the Company as
of August 1, 1996, the day Mr. Weinbach became Chief Executive Officer of the
Company. The agreement has successive one-year terms unless terminated by the
Company or Mr. Weinbach prior to June 1 of any year. Mr. Weinbach's annual base
salary is to be no less than $580,000, and his annual target bonus no less than
$290,000. The agreement provides that Mr. Weinbach is to be granted restricted
stock awards for a number of shares so that restrictions will lapse in each
fiscal year of the Company on shares with a market value on the date of the
award of at least $500,000. If Mr. Weinbach's employment is terminated by the
Company without cause, then he is entitled to receive his base salary for 18
months and continue to vest in his restricted stock awards and stock options. If
his employment is terminated following a change-in-control of the Company, he
will receive a termination payment equal to a percentage, ranging from 300% if
such termination occurs within two years of such change-in-control to 100% if it
occurs after the third year, of his annual base salary and his average annual
bonus for the prior two years. In addition, all of his stock options will become
fully vested and all of his restricted stock having restrictions lapsing within
three years after such termination shall have such restrictions automatically
removed.
Mr. Butler has entered into an agreement with the Company which provides for
a defined severance period, not to exceed nine months, in the event of a
termination of his employment resulting from a change-in-control of the Company.
CERTAIN TRANSACTIONS
Harvey M. Krueger, a director of the Company, is Vice Chairman of Lehman
Brothers, which provided various investment banking and brokerage services to
the Company in the past fiscal year.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION
DECISIONS
The Compensation Committee of the Board of Directors is composed of three
outside directors: Messrs. Heilmeier, Malek and Tisch.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the "Committee") is
responsible for setting on behalf of the Board of Directors the base salaries
and the total compensation levels of the Chairman and Chief Executive Officer,
the President and Chief Operating Officer and the Group Presidents of the
Employer Services, Brokerage Services and Dealer Services businesses, as well as
a structure for other key executives of the Company. The Committee grants all
stock options and reviews all recommendations for grants of restricted stock to
these and other key executives.
12
COMPENSATION POLICIES
The Company's executive compensation policies for fiscal 1998, which were
reviewed by the Committee, were designed to emphasize both competitive and
variable compensation, with direct linkages to business objectives and
exceptional performance.
The primary components of the compensation package for key executives for
fiscal 1998 were base salary, bonus, restricted stock and stock options. The
Company and the Committee have always believed that stock ownership in the form
of restricted stock and longer-term stock option vesting is
vital in linking management to stockholder interests. The Company sets its
salary, bonus and restricted stock targets (i.e. direct cash compensation) BELOW
the median of market range levels of comparable sized companies in the S&P 500.
Therefore, executives derive more from stock option price appreciation as a
percent of total compensation than in a company whose direct cash compensation
is set at market levels or higher.
ANNUAL COMPENSATION
Annual total compensation consists of base salary, cash bonus and yearly
vesting of restricted stock. The base salaries for executives for fiscal 1998
were determined based upon the job grade of the position, the salary range of
the job grade and the performance of the executive.
Key executives earned cash bonuses in fiscal 1998 based upon individual
annual accomplishments versus individual pre-established goals that included
business growth and increased profitability. Performance goals also included
quality/service, product development, organization development and leadership.
LONG-TERM COMPENSATION
Long-term compensation is comprised of future restricted stock and stock
options vestings. The Company has from time to time sold shares of restricted
stock to executive officers and other key employees, at par value, in
recognition of their individual levels of relative responsibility and
prospective contributions to the business. Company, imposed restrictions on
transfer or pledge of the restricted stock generally lapse over the ensuing five
years, and are subject to continued employment. The restricted stock plan is
designed to encourage stock ownership, longevity, and long-term performance.
Stock options are granted to executive officers and other key employees in
amounts based upon their job grade and individual performance. Stock options are
granted at fair market value as of the date of grant, and have a term of up to
ten years. Stock options provide incentive for the creation of stockholder value
over the long-term, and also significantly aid in executive recruiting and
retention.
Restricted stock and stock option grants were made to individual key
executives during fiscal 1998 on a basis consistent with the above guidelines.
BENEFITS
The Company provided certain supplemental benefits to key executives during
fiscal 1998 to ensure that it could compete effectively for executive talent.
These supplemental benefits included additional company paid life insurance and
certain additional retirement benefits described in the "Defined Benefit Plans"
section of this proxy statement.
13
CEO COMPENSATION
The Committee meets annually without the Chief Executive Officer present to
evaluate his performance and to determine his compensation.
In fiscal 1998, the Company achieved its 37th consecutive year of double
digit earnings per share growth. Based on those results and pursuant to the
terms of his employment agreement, Mr. Weinbach received a base salary of
$625,000 and a bonus of $412,500 during fiscal 1998. Such compensation is below
the median base salary and bonus compensation of chief executive officers at
companies in the S&P 500 with annual revenues between $1 and $6 billion, as
surveyed by the Company.
The incentives of the Chief Executive Officer are provided in the form of
restricted stock and stock options. This ensures that the Chief Executive
Officer and the Company's stockholders would have a commonality of purpose in
enhancing stockholder value. The Committee has granted Mr. Weinbach, during the
last five years, stock options totaling 370,000 shares and the opportunity to
purchase 41,400 shares of restricted stock.
Compensation Committee
of the Board of Directors
Frederic V. Malek, Chairman
George H. Heilmeier
Laurence A. Tisch
14
PERFORMANCE GRAPH
The following graph compares the cumulative return on the Common Stock of
the Company for the most recent five years with the cumulative total return on
the S&P 500 Index and a Peer Group Index* comprised of direct competitors of the
Company over the same period, assuming an initial investment of $100 on June 30,
1993, with all dividends reinvested.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
CUMULATIVE RETURN
AUTOMATIC S&P 500 PEER
Year DATA PROCESSING INDEX GROUP
Jun-93 $100.00 $100.00 $100.00
Jun-94 $111.76 $98.61 $116.75
Jun-95 $132.31 $120.91 $169.70
Jun-96 $164.11 $148.85 $240.55
Jun-97 $201.61 $196.47 $208.16
Jun-98 $315.44 $251.67 $286.66
- ------------------------
* The Peer Group Index is comprised of the following companies:
AFFILIATED COMPUTER SERVICES, INC. FIRST DATA CORPORATION PMT SERVICES, INC.
THE BISYS GROUP, INC. FISERV, INC. THE PROFIT RECOVERY GROUP
CERIDIAN CORP. HEALTH MANAGEMENT SYSTEMS, INC INTERNATIONAL, INC.
COMPUTER SCIENCES CORPORATION HEALTH SYSTEMS DESIGN CORPORATION SEI INVESTMENTS COMPANY
CONCORD EFS, INC. HPR INC. SHARED MEDICAL SYSTEMS CORPORATION
DELUXE CORPORATION MEDAPHIS CORPORATION SPS TRANSACTION SERVICES, INC.
DST SYSTEMS, INC. NATIONAL DATA CORPORATION SUNGARD DATA SYSTEMS INC.
ELECTRONIC DATA SYSTEMS CORPORATION NATIONAL PROCESSING, INC. TOTAL SYSTEM SERVICES, INC.
ENVOY CORPORATION NOVA CORPORATION ULTRADATA CORPORATION
EQUIFAX INC. PAYCHEX, INC.
15
PROPOSAL 2
APPROVAL OF AN AMENDMENT TO THE COMPANY'S RESTATED
CERTIFICATE OF INCORPORATION TO INCREASE THE NUMBER
OF SHARES OF COMMON STOCK AUTHORIZED THEREUNDER
The Board of Directors of the Company has adopted a resolution declaring it
advisable to amend the Company's Restated Certificate of Incorporation to
increase the number of authorized shares of Common Stock of the Company, par
value $.10 per share, from 500,000,000 to 1,000,000,000 shares.
The amendment will provide additional shares of Common Stock that could be
issued from time to time by the Board of Directors, without soliciting further
stockholder approval, for various corporate purposes including, but not limited
to, acquisitions of other companies and stock dividends, stock splits and other
distributions. At this time, the Board of Directors has no specific plans for
utilizing the authorized but unissued and unreserved shares; however, the Board
believes it is desirable to have the authorized capital of the Company
sufficiently flexible so that future business needs and corporate opportunities
may be dealt with by the Board of Directors without further stockholder action.
Although some of such additional authorized shares could be used in a
transaction to thwart a takeover attempt, such is not the current intention of
the Board of Directors, nor is the Board aware of any threatened takeover.
If adopted by the stockholders, the proposed amendment will be accomplished
by the filing of a Certificate of Amendment to the Restated Certificate of
Incorporation, substantially in the form of Exhibit "A" hereto, with the
Secretary of State of the State of Delaware, which would be expected to be
accomplished promptly following stockholder approval.
Financial statements are not included in this proxy statement, as they are
not deemed to be material to a decision upon the proposed amendment.
Holders of Common Stock of the Company have no pre-emptive rights to
subscribe for or purchase or receive any additional shares, bonds, debentures or
other securities of the Company.
STOCKHOLDER APPROVAL REQUIRED
Approval of the proposed amendment to the Company's Restated Certificate of
Incorporation by the affirmative vote of the holders of a majority of the
outstanding shares entitled to vote is required.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
APPROVAL OF THE AMENDMENT TO THE COMPANY'S RESTATED CERTIFICATE OF
INCORPORATION.
16
PROPOSAL 3
APPROVAL OF AN AMENDMENT TO THE COMPANY'S
EMPLOYEES' SAVINGS--STOCK PURCHASE PLAN
AMENDMENT OF THE PURCHASE PLAN
At the 1968 Annual Meeting of Stockholders, the stockholders of the Company
adopted the Employees' Savings--Stock Purchase Plan (the "Purchase Plan"). On
August 13, 1998, the Board of Directors of the Company adopted an amendment to
the Purchase Plan, effective November 11, 1998, increasing the number of shares
of the Company's Common Stock which can be sold pursuant to the Purchase Plan by
5,000,000 shares, so that after such amendment and seven similar previous
amendments the total number of shares allocated to the Purchase Plan is
37,160,000. Prior to such amendment there remained available for sale under the
Purchase Plan as at August 31, 1998 an aggregate of 1,395,349 shares, exclusive
of shares under election for purchase pursuant to prior offerings. The Company
intends to use the shares authorized by the amendment for future offerings under
the Purchase Plan.
DESCRIPTION OF THE PURCHASE PLAN
Under the Purchase Plan, eligible employees of the Company and its
subsidiaries may be given the opportunity to purchase, through installment
payments to be deducted from salary, shares of the Company's Common Stock. On
August 31, 1998, there were 15,115 employees participating in the 1996 offering
of the Purchase Plan and 18,932 employees participating in the 1997 offering,
many of whom are also participants in the 1996 offering. The purpose of the
Purchase Plan is to obtain for the Company, through encouraging the purchase of
shares of the Common Stock of the Company by a large number of its employees,
the benefit of the added incentive inherent in the ownership of the Company's
stock by such employees.
The Purchase Plan provides for one or more offerings of the shares
authorized (including the shares to be added by the proposed amendment) to
eligible employees of the Company and of such of its subsidiaries as may be
invited to participate by the Company. In connection with each such offering,
the Company will designate the number of shares available for purchase and the
period during which installment payments in fulfillment of the purchase price
shall be made.
The Purchase Plan provides that the price at which shares of stock will be
sold to eligible employees under each offering will be the lesser of (i) 85% of
the market price on the last business day of the purchase period specified in
each offering, and (ii) 85% of the market price on the day on which the option
to participate is granted. Payment for shares is made on an installment basis by
payroll allotments with no right of prepayment. Interest is allowed on
employees' accounts at a rate determined by the Company in connection with each
offering. Any employee who has elected to purchase shares may cancel his
election to purchase as to any or all of such shares and receive a cash refund
of the amount credited to his account with respect to the shares as to which he
has canceled. An election to purchase is deemed to be canceled in the event an
employee dies, resigns or is dismissed.
The closing price of the Company's Common Stock on The New York Stock
Exchange Composite Tape on September 11, 1998 was $[ ].
17
PRIOR OFFERINGS
Offerings under the Purchase Plan have been made in each of the years 1968
through 1997. The offerings made in 1996 and 1997 are still in progress and, as
of August 31, 1998, 1,715,515 and 1,840,691 shares were under election for
purchase at a maximum cost of $34.54 and $41.84 per share, respectively, which
represents 85% of the adjusted market price of the Company's Common Stock on the
day on which the option to participate was granted. If the average market price
of the Company's Common Stock on the last business day of December 1998 and 1999
is less than $40.625 and $49.2188, respectively, the purchase price per share
will be equal to the 85% of the average market price of the Company's Common
Stock on such date.
TAX CONSEQUENCES
The Purchase Plan is intended to qualify as an "employee stock purchase
plan" within the meaning of Section 423(b) of the Internal Revenue Code of 1986,
as amended (the "Code"). The Plan is not qualified under Section 401(a) of the
Code.
If the optionee does not dispose of the shares transferred to him under the
Purchase Plan within two years after the date of the granting of the option and
within one year after the transfer of such shares to him, he will not realize
taxable income upon the grant or exercise of the option, and any gain or loss
subsequently realized by him will be treated as a long-term capital gain or
loss, as the case may be, except that upon a disposition of the shares
purchased, or in the event of the employee's death (whenever occurring) while
owning such shares, the employee will be taxed on an amount of ordinary income
equal to the lesser of (i) the excess of the fair market value of the shares at
the time the option was granted over the purchase price determined as if the
option were exercised on the date of grant, or (ii) the excess, if any, of the
fair market value of the shares at the time the shares were disposed of, or at
the time of death, as the case may be, over the purchase price. The basis of
such shares will be increased by an amount equal to the amount taxable as
ordinary income, and any further gain on such a disposition will be taxable as a
long-term capital gain. The Company will not be entitled to a deduction for
Federal income tax purposes with respect to the granting of such options, the
issuance of the shares upon the exercise of the options, or the subsequent
dispositions of the shares purchased.
If the shares issued under the Purchase Plan are disposed of prior to the
expiration of the required holding periods described above, the employee will
realize ordinary income in the year in which the disqualifying disposition
occurs, the amount of which will generally be the excess of the fair market
value of such shares at the time of purchase over the purchase price. Such
amount will be deductible by the Company for Federal income tax purposes. In
addition, the excess of the amount realized on a disqualifying disposition over
the market value on the date of purchase will be taxable to the optionee as a
short-term capital gain.
STOCKHOLDER APPROVAL REQUIRED
Approval of the proposed amendment to the Purchase Plan by the affirmative
vote of the holders of a majority of the shares cast on the amendment is
required.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
APPROVAL OF THE AMENDMENT TO THE PURCHASE PLAN.
18
PROPOSAL 4
APPOINTMENT OF AUDITORS
At the Annual Meeting of Stockholders, the stockholders will vote on the
ratification of the appointment of Deloitte & Touche LLP, certified public
accountants, as independent auditors to audit the accounts of the Company and
its subsidiaries for the fiscal year begun July 1, 1998. A representative of
Deloitte & Touche LLP will be present at the Annual Meeting of Stockholders and
will have an opportunity to make a statement if he desires. He will be available
to answer appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
RATIFICATION OF THE APPOINTMENT OF THE AUDITORS.
OTHER MATTERS
So far as the Board of Directors is aware, only the aforementioned matters
will be acted upon at the meeting. If any other matters properly come before the
meeting, the accompanying proxy may be voted on such other matters in accordance
with the best judgment of the person or persons voting said proxy.
SECTION 16(B) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
During fiscal 1997, Frederic W. Malek, a director, filed late one Statement
of Changes in Beneficial Ownership (Form 4) covering two transactions that
occurred on January 3, 1997.
STOCKHOLDER PROPOSALS
Stockholder proposals intended to be presented at the 1999 Annual Meeting
must be received by the Company for inclusion in the 1999 Proxy Statement no
later than May 25, 1999.
ANNUAL REPORT
The Company's Annual Report for the fiscal year ended June 30, 1998, which
is not a part of the proxy soliciting material, is being mailed to the Company's
stockholders together with this proxy statement.
For the Board of Directors
James B. Benson
Secretary
Roseland, New Jersey
September 22, 1998
19
EXHIBIT A
AMENDED AND
RESTATED CERTIFICATE OF INCORPORATION
OF
AUTOMATIC DATA PROCESSING, INC.
------------------------
ADOPTED IN ACCORDANCE WITH THE PROVISIONS OF SECTIONS 242 AND 245 OF
THE GENERAL CORPORATION LAW OF THE STATE OF DELAWARE
------------------------
We, the Chairman of the Board and Chief Executive Officer and the Corporate
Vice President and Secretary, respectively, of Automatic Data Processing, Inc.,
a corporation existing under the laws of the State of Delaware, do hereby
certify under the seal of said corporation as follows:
I. That the name of the corporation is AUTOMATIC DATA PROCESSING, INC.
(hereinafter called the "Corporation").
II. That the Certificate of Incorporation of the Corporation was filed
by the Secretary of State on the 12th day of June 1961.
III. That this Certificate amends the Certificate of Incorporation by
increasing the number of authorized shares of Common Stock of the
Corporation to 1,000,000,000 shares.
IV. That the amendment and the restatement of the Certificate of
Incorporation of the Corporation have been duly adopted in accordance with
the provisions of Sections 242 and 245 of the General Corporation Law of the
State of Delaware by an affirmative vote of the holders of a majority of all
outstanding stock entitled to vote at a meeting of stockholders.
V. That the text of the Certificate of Incorporation of the
Corporation, as heretofore amended, is hereby restated, as further amended
by this Certificate, to read in its entirety as follows:
CERTIFICATE OF INCORPORATION
OF
AUTOMATIC DATA PROCESSING, INC.
We, the undersigned, in order to form a corporation for the purposes
hereinafter stated, pursuant to the provisions of Chapter 1 of Title 8 of the
Delaware Code of 1953, do hereby certify as follows:
FIRST: The name of the corporation is AUTOMATIC DATA PROCESSING, INC.
(hereinafter called the "Corporation").
A-1
SECOND: The address of the Corporation's registered office is 306 South
State Street, City of Dover; County of Kent, State of Delaware; and its
registered agent at such address is United States Corporation Company.
THIRD: The nature of the business and purposes to be conducted or promoted
by the Corporation are to engage in, carry on and conduct any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware; and in addition to, and without limiting the
generality of; the foregoing, the following:
(a) To engage in the business of preparing payrolls, performing
statistical, tabulating and clerical services of all kinds, conducting
research and analytical or statistical studies, preparing business reports
and surveys, rendering consulting services to business and performing
business services of any and all kinds of a similar nature;
(b) To engage in, carry on, conduct and/or participate in any general or
specific branch or phase of the activities, enterprises, or businesses
authorized in this Certificate in the State of Delaware or in any other
state of the United States and in all foreign countries, and in all
territories, possessions and other places, and in connection with the same,
or any thereof; to be and act either as principal, agent, contractor or
otherwise;
(c) To do everything necessary, suitable, convenient or proper for the
accomplishment, attainment or furtherance of; to do every other act or thing
incidental or appurtenant to, growing out of or connected with, the purposes
set forth in this Certificate, whether alone or in association with others;
to possess all the rights, powers and privileges now or hereafter conferred
by the laws of the State of Delaware upon corporations organized under the
General Corporation Law of the State of Delaware (as the same may be amended
from time to time) or any statute which may be enacted to supplement or
replace it, and, in general, to carry on any of the activities and to do any
of the things herein set forth to the same extent and as fully as a natural
person or a partnership, association, corporation or other entity, or any of
them, might or could do; provided, that nothing herein set forth shall be
construed as authorizing the Corporation to possess any purpose, object, or
power; or to do any act or thing, forbidden by law to a corporation
organized under the General Corporation Law of the State of Delaware. The
foregoing provisions of this Article shall be construed as purposes, objects
and powers, and each as an independent purpose, object and power; in
furtherance, and not in limitation, of the purposes, objects and powers
granted to the Corporation by the laws of the State of Delaware; and except
as otherwise specifically provided in any such provision, no purpose, object
or power herein set forth shall be in any way limited or restricted by
reference to, or inference from, any other provision of this Certificate.
FOURTH: The total number of shares which the Corporation shall have
authority to issue is One Billion Three Hundred Thousand (1,000,300,000),
consisting of Three Hundred Thousand (300,000) shares of Preferred Stock, of the
par value of One Dollar ($1.00) per share (hereinafter called "Preferred
Stock"), and One Billion (1,000,000,000) shares of Common Stock, of the par
value of Ten Cents ($.10) per share (hereinafter called "Common Stock").
The Board of Directors is hereby authorized to issue the shares of the
Preferred Stock in one or more series, to fix by resolution, to the extent now
or hereafter permitted by the laws of the State of Delaware, the designation
such series, the dividend rate of such series and the date or dates and other
provisions respecting the payment of dividends, the provisions, if any, for a
sinking fund for the shares of such series, the preferences of such series with
respect to dividends and in the event of the
A-2
liquidation or dissolution of the Corporation, the provisions, if any,
respecting the redemption of the shares of such series, the voting rights, if
any, of the shares of such series, the terms, if any, upon which the shares of
such series shall be convertible into or exchangeable for any other shares of
stock of the Corporation and any other relative, participating, optional or
other special rights, and qualifications, limitations or restrictions thereof;
of the shares of such series.
Subject to the payment or setting apart for payment of any preferential
dividends which the holders of shares of any series of Preferred Stock shall be
entitled to receive, the holders of the Common Stock shall be entitled to
receive such dividends as may be declared thereon from time to time by the Board
of Directors, in its discretion, from any assets legally available for the
payment of dividends.
In the event of the liquidation or dissolution of the Corporation, whether
voluntary or involuntary, after distribution to the holders of all shares of any
series of Preferred Stock which shall be entitled to a preference over the
holders of Common Stock of the full preferential amounts to which they are
entitled, the holders of Common Stock shall be entitled to share ratably in the
distribution of the remaining assets of the Corporation available for
distribution to shareholders.
Except as otherwise expressly provided in any resolution adopted by the
Board of Directors granting voting rights to the holders of shares of any series
of Preferred Stock and except as otherwise required by law the entire voting
power of the Corporation shall be vested in the Common Stock, and each share of
Common Stock shall have one vote for each share thereof held.
FIFTH: The following provisions are inserted for the management of the
business and the conduct of the affairs of the Corporation, and it is expressly
provided that the same are intended to be in furtherance and not in limitation
or exclusion of the powers conferred by law:
1. Members of the Board of Directors may be elected either by written
ballot or by voice-vote.
2. The Board of Directors may from time to time make, alter, or repeal
the By-laws of the Corporation; provided, that any By-laws made, amended, or
repealed by the Board of Directors may be amended or repealed, and new
By-laws may be made, by the stockholders of the Corporation.
3. The Corporation shall indemnify all directors and officers of the
Corporation to the full extent permitted by the General Corporation Law of
the State of Delaware (and in particular Paragraph 145 thereof), as from
time to time amended, and may purchase and maintain insurance on behalf of
such directors and officers. In addition, the Corporation shall, in the
manner and to the extent as the By-laws of the Corporation shall provide,
indemnify to the full extent permitted by the General Corporation law of the
State of Delaware (and in particular Paragraph 145 thereof), as from time to
time amended, such other persons as the By-laws shall provide, and may
purchase and maintain insurance on behalf of such other persons.
4. A director of the Corporation shall not be held personally liable to
the Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director; except for liability (i) for breach of the
director's duty of loyalty to the Corporation or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of law (iii) under Section 174 of the General
Corporation Law of the State of Delaware, or (iv) for any transaction from
which the director derived an improper personal benefit. Any repeal or
modification of this paragraph by the stockholders of the Corporation shall
not adversely affect any right
A-3
or protection of any director of the Corporation existing at the time of; or
for or with respect to any acts or omissions occurring prior to, such repeal
or modification.
SIXTH: Whenever a compromise or arrangement is proposed between this
Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may; on the application in a summary
way of this Corporation or of any creditor or stockholder thereof; or on the
application of any receiver or receivers appointed for this Corporation under
the provisions of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this Corporation under the provisions of Section 279 of Title 8 of the
Delaware Code order a meeting of the creditors or class of creditors, and/or of
the stockholders or class of stockholders of this Corporation, as the case may
be, to be summoned in such a manner as the said Court directs. If a majority in
number representing three-fourths (3/4) in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
Corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this Corporation as a consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the Court to which the said application has been made,
be binding on all creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of this Corporation, as the case may be,
and also on this Corporation.
IN WITNESS WHEREOF, We, Arthur F. Weinbach, Chairman of the Board and Chief
Executive Officer, and James B. Benson, Corporate Vice President and Secretary,
of AUTOMATIC DATA PROCESSING, INC., have signed this Certificate and caused the
corporate seal of the corporation to be hereunto affixed this day of November,
1998.
----------------------------------------
Arthur F. Weinbach
CHAIRMAN OF THE BOARD AND
CHIEF EXECUTIVE OFFICER
Attest:
----------------------------------------
James B. Benson
CORPORATE VICE PRESIDENT AND SECRETARY
[Corporate Seal]
A-4
[LOGO]
September 22, 1998
Dear Shareholder:
You are cordially invited to join us at the 1998 Annual Meeting of
Stockholders of Automatic Data Processing, Inc. This year's meeting will be held
at the corporate offices of the Company at One ADP Boulevard, Roseland, New
Jersey, on Tuesday, November 10, 1998, starting at 10:00 a.m. I hope you will be
able to attend. At the meeting we will (i) elect directors, (ii) vote on an
amendment to the Company's Restated Certificate of Incorporation increasing the
number of authorized shares of Common Stock of the Company to 1,000,000,000
shares, (iii) vote on an amendment to the Company's Employee's Savings-- Stock
Purchase Plan increasing by 5,000,000 shares the number of shares of Common
Stock that may be acquired by employees under the plan, and (iv) vote on the
appointment of Deloitte & Touche LLP as independent auditors.
It is important that your shares be voted whether or not you plan to be
present at the meeting. You should specify your choices by marking the
appropriate boxes on the proxy form on the reverse side, and date, sign and
return your proxy form in the enclosed, postpaid return envelope as promptly as
possible. If you date, sign and return your proxy form without specifying your
choices, your shares will be voted in accordance with the recommendation of your
directors.
As in the past years, we will discuss the business of the Company and its
subsidiaries during the meeting. I welcome your comments and suggestions, and we
will provide time during the meeting for questions from shareholders. I am
looking forward to seeing you at the meeting.
Sincerely,
Arthur F. Weinbach
Chairman and Chief Executive Officer
...............................................................................
[Form of Proxy -- Front]
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
PROPERLY EXECUTED PROXIES WILL BE VOTED AS MARKED AND, IF NOT MARKED, WILL BE
VOTED FOR THE ELECTION OF THE NOMINEES LISTED IN THE ACCOMPANYING PROXY
STATEMENT AND FOR PROPOSALS (2), (3) AND (4) ON THE REVERSE SIDE.
The undersigned hereby appoints Arthur F. Weinbach and Gary C. Butler, and
each of them, attorneys and proxies with full power of substitution, in the
name, place and stead of the undersigned, to vote as proxy at the 1998 Annual
Meeting of Stockholders of Automatic Data Processing, Inc. to be held at the
corporate offices of the Company, ONE ADP BOULEVARD, ROSELAND, NEW JERSEY 07068,
on Tuesday, November 10, 1998 at 10:00 A.M., or at any adjournment or
adjournments thereof, according to the number of votes that the undersigned
would be entitled to cast if personally present.
Either of said attorneys and proxies or substitutes, who shall be present at
such meeting or at any adjournment or adjournments thereof, shall have all the
powers granted to such attorneys and proxies.
PLEASE DATE, SIGN AND MAIL THE PROXY PROMPTLY IN THE SELF-ADDRESSED RETURN
ENVELOPE WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. WHEN SIGNING
AS AN ATTORNEY, EXECUTOR, ADMINISTRATOR, TRUSTEE OR GUARDIAN, PLEASE GIVE YOUR
FULL TITLE AS SUCH. IF SHARES ARE HELD JOINTLY, BOTH OWNERS SHOULD SIGN.
The nominees for Director are Gary C. Butler, Joseph A. Califano, Jr., Leon
G. Cooperman, George H. Heilmeier, Ann Dibble Jordan, Harvey M. Krueger,
Frederic V. Malek, Henry Taub, Laurence A. Tisch, Arthur F. Weinbach and Josh S.
Weston.
ADP'S VOTING SERVICES
As an alternative to completing the proxy form below, you may enter your vote by
telephone or via the Internet.
- --------------------------------------------------------------------------------
ADP'S TELEPHONE VOTING SERVICE
Now you can vote your proxy right over the telephone. It's fast, convenient, and
your Proxy is immediately confirmed and posted.
Phone 1-800-VOTE ADP
1-800-868-3237
Just follow these 4 easy steps:
1. Read the accompanying Proxy Statement and the proxy form below.
2. Phone the toll free number printed above.
3. Once you've been connected, enter your 12 digit Control Number printed below.
4. Then follow the simple instructions the Vote ADP voice provides you.
-------------------------------------------------------------------------------
CONTROL NUMBER:
-------------------------------------------------------------------------------
ADP INTERNET PROXY VOTING
Now you can vote your proxy via the internet. It's fast, convenient, and your
Proxy is immediately posted.
www.proxyvote.com
Just follow these 5 easy steps:
1. Read the accompanying Proxy Statement and the proxy form below.
2. Access the above internet address.
3. Enter your 12 digit Control Number printed above to obtain your records and create an
electronic ballot.
4. Complete and submit the electronic ballot form.
5. Enter your confirmation preference.
Director Nominees: (01) Gary C. Butler, (02) Joseph A. Califano, Jr., (03) Leon G.
Cooperman, (04) George H. Heilmeier, (05) Ann Dibble Jordan, (06) Harvey M. Krueger, (07)
Frederic V. Malek, (08) Henry Taub, (09) Laurence A. Tisch, (10) Arthur F. Weinbach, (11)
Josh S. Weston
MARK VOTES LIKE THIS /X/
The Board of Directors Recommends a vote FOR the proposals regarding:
FOR
all nominees listed
on the
(1) Election of Directors reverse side (except WITHHOLD
Authority to vote for all
as nominees on the reverse
marked to the side / /
contrary) / /
(INSTRUCTIONS: To withhold authority to vote for
any individual nominee, write that nominee's
name in the space provided below.)
----------------------------------------- FOR AGAINST ABSTAIN
(2) Amendment to the Company's Restated Certificate / / / / / /
of Incorporation to Increase the Number of
Shares of Common Stock Authorized thereunder
(3) Amendment to the Company's Employees' Savings-- / / / / / /
Stock Purchase Plan
(4) Appointment of Deloitte & Touche LLP / / / / / /
(5) Upon any and all other matters which may / / / / / /
properly come before the meeting or any
adjournment thereof.
SIGNATURE DATE
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TO ELIMINATE DUPLICATE MAILINGS, PLEASE
MARK THIS BOX / / SIGNATURE DATE
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